Monday, September 12, 2016

EUA Dec16: Consolidation around 4 euro

Although it hit a new 3-year low on Monday, the EUA Dec16 consolidated around 4 euro last week and closed unchanged in a weekly comparison.
Despite opening 5 cents above the settlement price of the Friday before, the EUA Dec16 slipped lower to an intra-day low at 3.87 euro after the auction on Monday, a new 3-year low. The price could not recover by the end of the day, and closed below 4 euro (for the first time since May 2013). The price lost 3.7% on a daily basis. The RSI slipped below 30 suggesting that some correction might be in the cards.
After 7 black candles and an RSI at 28 we saw a white candle on Tuesday. The price opened 4 cents above Monday’s settlement price, but fell to an intra-day low at 3.90 euro in the morning as the price of Brent went through a correction. The strong auction result, however, pulled the price above 4 euro again and it closed at 4.13 euro, up by 20 cents or 5%. The decline of the two previous days, however, pushed the 20DMA below the 30DMA, which is a bearish signal.
Despite a strong opening (4 cents above Tuesday’s settlement price), the EUA Dec16 slipped continuously on Wednesday, and closed at 4.01 euro, down 12 cents or 2.9%.
The EUA Dec16 moved in a narrow range of 12 cents on Thursday. The price received support from the falling coal price, the stronger euro and the improving dark spread. The price got a special boost in the afternoon from the rallying oil price. (US crude inventories surprisingly declined versus the expected increase.) It therefore closed at its daily high, at 4.08 euro, up by 1.7%.
The benchmark carbon contract had a quiet Friday. It moved in a 13 cents range, climbed to an intra-day high at 4.15 euro before falling back to Thursday’s closing level. Friday's candle is a doji that often signals the hesitation of the price about which direction to take.
The daily minimums since last Monday when the price hit 3.87 euro (a three year low) increased every day, but the price could not break above 4.17 euro (although trying three times). 
The technical indicators are in neutral territory (with the exception of the 20/30DMA cross) and price seems consolidating around 4 euro. We have a neutral view on the carbon price for next week with a base range of 3.80-4.30 euro, emphasising that the auction results and the energy mix can increase the volatility of the price.

Source: Bloomberg L.P.

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